* Superlong JGBs underperform, leading to yield curve
* Ten-year futures rise on expectations of BOJ easing
TOKYO, March 6 Japanese government bond prices
fell on Wednesday, giving up some of their steep gains earlier
this week, with the superlong sectors underperforming, leading
to the yield curve steepening.
The 20-year yield rose 2 basis points to
1.565 percent after edging close to a 10-year trough of 1.450
percent on Tuesday, while the 30-year yield added
2.5 basis points to 1.755 percent after sinking to a 2-1/2-year
low of 1.625 percent the previous day.
The 10-year yield inched up 1 basis point to
0.670 percent, although 10-year futures, which are more
liquid and tend to move opposite to yield, rose 8 ticks to
145.06 as investors kept betting on further aggressive monetary
easing from the Bank of Japan.
"The market has been driven by expectations that the BOJ
will continue to ease monetary policy and may extend the
maturities of the JGBs it buys, particularly after April," said
Yuya Yamashita, rates strategist at J.P. Morgan.
The central bank is to conclude a two-day policy meeting on
Thursday, the last under Governor Masaaki Shirakawa, who will
step down on March 19.
Haruhiko Kuroda, nominated for BOJ governor, said on Monday
during his confirmation hearing that the BOJ should strive to
reach its 2 percent inflation target in two years and the most
natural way to ramp up stimulus would be to buy longer-date
His comments helped drive JBG yields sharply lower on
Monday, with the 30-year yield posting its biggest one-day fall
since September 2010.
Yamashita said he expected the 10-year to trade in the range
of 0.600 to 0.700 percent in the near term.
The underperformance in the superlong sectors led to a
steepening of the yield curve on Wednesday, with the spread
between 10- and 30-year bonds rising to 108.5 basis points from
a 6-1/2-month low of 105.5 basis points hit on Tuesday.
The shorter-dated five-year yield was
unchanged, at 0.110 percent, not far from its record low of
0.095 percent reached on Monday, also helped by the central
bank's easing expectations.
"When we start to get stronger economic numbers, investors
will start positioning for a successful exit from deflation, but
until then, it is difficult to find safe ways to fade the BOJ's
bond buying," said Neale Vincent, strategist at Nomura
"One possibility is to use auction timing. With long-end
issuance on the increase, it's probably ok to fade the
flattening in the periods between the 10-year and the 20-year
Japan will issue a record 156.6 trillion yen ($1.7
trillion)of JGBs through regular auctions in the fiscal year
from next April, including 42.8 trillion yen of bonds to finance
The ministry will also increase the frequency of 30-year
debt auctions to once a month in fiscal 2013/14 from the current
schedule of eight times a year to develop the market for